Friday, February 29, 2008

Time For The West to Practise What it Preaches

By Abdoulaye Wade

When it comes to China and Africa, the European Union and the US want to have their cake and eat it. In an echo of its past colonial rivalries, European leaders and donor organisations have expressed concerns that African nations are throwing their doors open too wide to Chinese investors and to exploitation by their Asian partners.

But if opening up more free markets is a goal that the west prizes – and extols as a path to progress – why is Europe fretting about China’s growing economic role in Africa? The expansion of free markets has indeed been a boon to Africa. But as I tell my friends in the west, China is doing a much better job than western capitalists of responding to market demands in Africa.

The battle for influence in the world between the west and China is not Africa’s problem. Our continent is in a hurry to build infrastructure, ensure affordable energy and educate our people. In many African nations, African leaders are striving to reinforce robust economic growth in a sustainable manner and reduce “brain-drain” incentives that have led to an exodus of well-educated Africans to Europe.

China’s approach to our needs is simply better adapted than the slow and sometimes patronising post-colonial approach of European investors, donor organisations and non-governmental organisations. In fact, the Chinese model for stimulating rapid economic development has much to teach Africa.

With direct aid, credit lines and reasonable contracts, China has helped African nations build infrastructure projects in record time – bridges, roads, schools, hospitals, dams, legislative buildings, stadiums and airports. In many African nations, including Senegal, improvements in infrastructure have played important roles in stimulating economic growth.

These are improvements, moreover, that stay in Africa and raise the standards of living for millions of Africans, not just an elite few. In Senegal, a Chinese company cannot be awarded an infrastructure-related contract unless it has partnered with a Senegalese company. In practice, Chinese companies are not only investing in Senegal but transferring technology, training, and know-how to Senegal at the same time.

It is a telling sign of the post-colonial mindset that some donor organisations in the west dismiss the trade agreements between Chinese banks and African states that produce these vital improvements – as though Africa was naïve enough to just offload its precious natural resources at bargain prices to obtain a commitment for another stadium or state house.

In the past, the political power-play between Taiwan and China often spurred Asian investment on the African continent. Today, however, economic relations are based more on mutual need – and the economic reality that the EU and the US cannot compete with China. A number of big projects in Senegal had initially been funded by the Taiwanese, but in 2005, Senegal abandoned the politicisation of development and opted for decisions based on a free market.

I have found that a contract that would take five years to discuss, negotiate and sign with the World Bank takes three months when we have dealt with Chinese authorities. I am a firm believer in good governance and the rule of law. But when bureaucracy and senseless red tape impede our ability to act – and when poverty persists while international functionaries drag their feet – African leaders have an obligation to opt for swifter solutions. I achieved more in my one hour meeting with President Hu Jintao in an executive suite at my hotel in Berlin during the recent G8 meeting in Heiligendamm than I did during the entire, orchestrated meeting of world leaders at the summit – where African leaders were told little more than that G8 nations would respect existing commitments.

At the same time that China has been especially nimble, the prices and quality of goods coming from Asia give African governments no choice other than to buy Chinese, Indian and Malaysian goods. For the price of one European vehicle, a Senegalese can purchase two Chinese cars. The proof is in the parking lot at the presidential palace in Dakar. Low-cost Chinese Chery and Great Wall models are giving Senegal’s middle and working classes access to a new car, a sign of our emerging consumer class. We are even using these affordable Chinese cars in a pilot project to reinsert unemployed women into the workforce by creating a fleet of taxis called Sister Taxis. When products are affordable, innovative programmes become realistic.

China, which has fought its own battles to modernise, has a much greater sense of the personal urgency of development in Africa than many western nations. Last year, the Chinese Eximbank pledged $20bn in development funds for African infrastructure and trade financing over the next three years, funds that outstripped all western donor pledges combined. News of the Exim commitment caused a fuss in some quarters of Europe. But western complaints about China’s slow pace in adopting democratic reform cannot obscure the fact that the Chinese are more competitive, less bureaucratic and more adept at business in Africa than their critics.

Today I find myself at the heart of an economic struggle with the EU. If Europe does not want to provide funding for African infrastructure – it pledged $15bn under the Cotonou Agreement eight years ago – the Chinese are ready to take up the task, more rapidly and at less cost. Not just Africa but the west itself has much to learn from China. It is time for the west to practice what it preaches about the value of market incentives.

Economic and Social Development of China in 2007

In 2007, the gross domestic product (GDP) of the year was 24,661.9 billion yuan, up by 11.4 percent over the previous year. Analyzed by different industries, the value added of the primary industry was 2,891.0 billion yuan, up by 3.7 percent, that of the secondary industry was 12,138.1 billion yuan, up by 13.4 percent and the tertiary industry was 9,632.8 billion yuan, up by 11.4 percent. The value added of the primary industry accounted for 11.7 percent of the GDP, maintaining the same level of the pervious year, that of the secondary industry accounted for 49.2 percent, up by 0.3 percentage point, and that of the tertiary industry accounted for 39.1 percent, down by 0.3 percentage point. Quarterly data showed that the GDP growth in the first quarter of the year was 11.1 percent; second quarter 11.9 percent, third quarter 11.5 percent and 11.2 percent growth for the fourth quarter.

Figure 1: Gross Domestic Product and its Growth, 2003-2007

The general level of consumer prices in China was up by 4.8 percent over the previous year. Of this total, the prices for food went up by 12.3 percent. The retail prices for commodities were up by 3.8 percent. The prices for investment in fixed assets were up by 3.9 percent. The producer prices for manufactured goods increased by 3.1 percent, of which, the prices for means of production increased by 3.2 percent, and for means of subsistence grew by 2.8 percent. The purchasing prices for raw materials, fuels and power went up by 4.4 percent. The producer prices for farm products were up by 18.5 percent. The sales prices for housing in 70 large and medium-sized cities were up by 7.6 percent, of which, that for new residential buildings went up by 8.2 percent, for second hand housing grew by 7.4 percent, and the prices for rental and leasing were up by 2.6 percent.

Figure 2: Changes in Consumer Prices, 2003-2007

At the end of 2007, the total of employed people in China numbered 769.90 million, 5.90 million more than that of 2006. Of this total, 293.50 million were employed in urban areas, a net increase of 10.40 million, a newly increase of 12.04 million. The urban unemployment rate through unemployment registration was 4.0 percent at the end of 2007, a drop of 0.1 percentage point over that of 2006.

At the end of 2007, China’s foreign exchange reserves reached 1,528.2 billion US dollars, an increase of 461.9 billion US dollars as compared with that at the end of the pervious year. At the end of the year, the exchange rate was 7.3046 RMB to 1 USD, an appreciation by 6.9 percent over that at the end of 2006.

Figure 3: Year-end Foreign Exchange Reserves, 2003-2007

The taxes collected in the whole year reached 4,944.9 billion yuan (excluding tariffs, farm land taxes and deed taxes), up by 31.4 percent or an increase of 1,181.3 billion yuan over 2006.

Figure 4: Tax Revenue and its Growth, 2003-2007

II. Agriculture

In 2007, the sown area of grain was 105.53 million hectares, an increase of 700 thousand hectares as compared with that in the previous year; the sown area of cotton was 5.59 million hectares, an increase of 70 thousand hectares; the sown area of oil-bearing crops was 10.94 million hectares, a decline of 600 thousand hectares; the sown area of sugar crops was 1.67 million hectares, an increase of 100 thousand hectares.

The total output of grain in 2007 was 501.50 million tons, an increase of 3.50 million tons or up by 0.7 percent over the previous year. Of this total, the output of summer crops was 115.34 million tons, up by 1.3 percent, and that of the early rice was 31.96 million tons, up by 0.3 percent. The output of autumn grain was 354.20 million tons, an increase of 0.6 percent.

Figure 5: Output of Grain and its Growth, 2003-2007

In 2007, the output of cotton was 7.60 million tons, a growth of 1.3 percent over the previous year, that of oil-bearing crops was 24.61 million tons, down by 4.2 percent and that of sugar crops was 111.10 million tons, an increase of 11.4 percent, that of tobacco was 2.39 million tons, down by 3.9 percent, and that of tea was 1.14 million tons, up by 10.9 percent.

The total output of meat for the year reached 68.00 million tons, down by 3.5 percent. Of this total, the output of pork was down by 9.2 percent, and that of beef and mutton went up by 6.1 percent and 5.8 percent respectively. The total output of aquatic products was 47.37 million tons, up by 3.3 percent. The total production of timber for the year 2007 reached 69.74 million cubic meters, an increase of 5.5 percent.

Over 1.07 million hectares of farmland was increased with effective irrigation systems and another additional 1.36 million hectares of farmland was guaranteed by water-saving irrigation systems.

III. Industry and Construction

In 2007, the total value added of the industrial sector was 10,736.7 billion yuan, up by 13.5 percent over the previous year. The value added of industrial enterprises above the designated size was up by 18.5 percent. of this total, that of the state-owned and state-holding enterprises grew by 13.8 percent, that of the collective enterprises went up by 11.5 percent, that of the share-holding enterprises increased by 20.6 percent, that of the enterprises by foreign investors and investors from Hong Kong, Macao and Taiwan soared by 17.5 percent and 26.7 percent growth for private enterprises. Analyzed by light and heavy industries, the growth of the light industry was 16.3 percent and that of the heavy industry was 19.6 percent.

Figure 6: Industrial Value Added and its Growth, 2003-2007

In 2007, of the industrial enterprises above designated size, the growth of value added for the mining and washing of coal industry was18.1 percent over the previous year, for the extraction of petroleum and natural gas was 3.9 percent, for textile industry 16.2 percent, for processing of food from agricultural product 16.9 percent, for manufacture of general machinery 24.2 percent, for manufacture of transport equipment 26.2 percent, for manufacture of communication equipment, computers and other electronic equipment 18.0 percent and for manufacture of electrical machinery and equipment 21.5 percent. the growth of the value added for the major six high energy consuming industries were 18.9 percent, of which, that of the manufacture of non-metallic mineral products was 24.7 percent, smelting and pressing of ferrous metals 21.4 percent, manufacture of raw chemical materials and chemical products 21.0 percent, smelting and pressing of non-ferrous metals 17.8 percent, production and supply of electric power and heat power 13.8 percent and 13.4 percent for processing of petroleum, coking, processing of nuclear fuel. The value added growth for the high-tech industry was 17.8 percent over the previous year.

The profits made by the industrial enterprises above the designated size in the first 11 months of 2007 were 2,295.1 billion yuan, an increase of 36.7 percent over the same period of last year.

In 2007, the value added of construction enterprises in China was 1,401.4 billion yuan, up by 12.6 percent over the previous year. The profits made by construction enterprises qualified for general contracts and specialized contracts reached 147.0 billion yuan, up by 23.2 percent, with their paid taxes of 166.1 billion yuan, up by 18.5 percent.

IV. Investment in Fixed Assets

The completed investment in fixed assets of the country in 2007 was 13,723.9 billion yuan, up by 24.8 percent over the previous year. of the total investment, that in urban areas was 11,741.4 billon yuan, up by 25.8 percent; and that in rural areas reached 1,982.5 billion yuan, up by 19.2 percent. An analysis by regions showed that the investment in east areas was 7,231.4 billion yuan, up by 19.9 percent over the previous year, in central areas was 3,428.3 billion yuan, a growth of 33.3 percent, and in western areas 2,819.4 billion yuan, a growth of 28.2 percent.

Figure 7: Investment in Fixed Assets and its Growth, 2003-2007

In the urban areas, the investment in the primary industry was 146.6 billion yuan, up by 31.1 percent; that in the secondary industry was 5,102.0 billion yuan, up by 29.0 percent; and that in the tertiary industry was 6,492.8 billion yuan, up by 23.2 percent.

Table 4: Fixed Assets Investment in Urban Areas and its Growth by Sector in 2007

In 2007, the investment in real estate development was 2,528.0 billion yuan, up by 30.2 percent. Of this total, the investment in commercial residential buildings reached 1,801.0 billion yuan, an increase of 32.1 percent. The completed floor space of commercial buildings reached 582.36 million square meters, up by 4.3 percent. The total sales of commercial buildings reached 761.93million square meters, up by 23.2 percent, of which, that of the commercial residential building were 691.04 million square meters, up by 24.7 percent.

V. Domestic Trade

In 2007, the total retail sales of consumer goods reached 8,921.0 billion yuan, up by 16.8 percent over the previous year. An analysis on different areas showed that the retail sales of consumer goods in cities reached 6,041.1 billion yuan, up by 17.2 percent and the retail sales of consumer goods at and below county level was 2,879.9 billion yuan, up by 15.8 percent. Analyzed by different sectors, the sales of the wholesales and retail trade reached 7,504.0 billion yuan, up 16.7 percent; the sales of the lodging and catering industry was 1,235.2 billion yuan, up 19.4 percent, and the sales of the other industries was 181.8 billion yuan, up 4.5 percent.

Of the total retail sales by wholesale and retail enterprises above designated size, the sales of grain and oil was up by 38.3 percent, meat and eggs up by 40.9 percent, clothing up by 28.7 percent, motor vehicles up by 36.9 percent, petroleum and related products up by 20.5 percent, daily necessities up by 26.5 percent, cultural and office goods up by 22.6 percent, telecommunication equipment up by 8.8 percent, electric and electronic appliances for household use and audio-video equipment up by 23.4 percent, building and decoration materials up by 43.6 percent, furniture up 43.2 percent, cosmetics up by 26.3 percent, gold, silver and jewelry up by 41.7 percent and traditional Chinese drugs and western drugs up by 25.1 percent.

Figure 8: Total Retail Sales of Consumer Goods and its Growth, 2003-2007

VI. Foreign Economic Relations

The total value of imports and exports in 2007 reached 2,173.8 billion US dollars, up 23.5 percent over the previous year. Of this total, the value of exports was 1,218.0 billion US dollars, up 25.7 percent, and the value of imports was 955.8 billion US dollars, up 20.8 percent. China had a trade surplus of 262.2 billion US dollars, an increase of 84.7 billion US dollars over the previous year.

Figure 9: Imports and Exports and the Growth Rates, 2003-2007

The year 2007 witnessed the establishment of 37,871 enterprises with foreign direct investment in non-financial sectors, down by 8.7 percent; and the foreign capital actually utilized was 74.8 billion US dollars, up by 13.6 percent. Of the total foreign direct investment actually utilized, the share of investment in manufacturing was 54.7 percent over the pervious year, the real estate 22.9 percent, leasing and business service 5.4 percent, wholesales and retail trade 3.6 percent and transportation, storage and post service 2.7 percent.

In 2007, the overseas direct investment (non-financial sectors) by Chinese investors was 18.7 billion US dollars, up by 6.2 percent over the previous year.

In 2007, the accomplished business revenue through contracted overseas engineering projects was 40.6 billion US dollars, up by 35.3 percent, and the business revenue through overseas labor contracts was 6.8 billion US dollars, up by 26.0 percent over the previous year.

VII. Transportation, Post, Telecommunications and Tourism

The value added of the transportation, storage, post and telecommunication sectors reached 1,364.9 billion yuan in 2007, up 9.7 percent over the previous year.

The volume of freight handled by ports above the designated size throughout the year totaled 5.21 billion tons, up 13.4 percent over the previous year, of which freight for foreign trade was 1.78 billion tons, up 12.6 percent. Container shipping handled 111.79 million standard containers, up by 21.5 percent.

The total number of motor vehicles for civilian use reached 56.97 million (including 14.68 million tri-wheel motor vehicles and low-speed trucks) by the end of 2007, up 14.3 percent, of which private-owned vehicles numbered 35.34 million, up 20.8 percent. The total number of cars for civilian use stood at 19.58 million, up by 26.7 percent, of which private-owned cars numbered 15.22 million, up by 32.5 percent.

The turnover of post and telecommunication services totaled 1,936.1 billion yuan, up 26.4 percent over the previous year. Of this total, post services accounted for 81.5 billion yuan, up 11.8 percent, and telecommunication services 1,854.5 billion yuan, up 27.1 percent. By the end of 2007, with 8.36 million newly installed lines of office switchboards, the total capacity reached 510 million lines. The year also saw 365.45 million fixed telephone subscribers. This included 248.59 million urban subscribers and 116.86 million rural subscribers. Mobile phone users numbered 547.29 million by the end of 2007, with 86.23 million new subscribers in the year. In total, the number of fixed and mobile phone users reached 912.73 million, an increase of 83.89 million as compared with at the end of 2006. Phone coverage is 69 sets per 100 persons. The number of Internet users was 210 million and wide-band users reached 163 million.

Figure 10: Number of Phone Subscribers, 2003 - 2007

In 2007, the number of inbound visitors to China totaled 131.87 million, a year-on-year rise of 5.5 percent. Of this total, 26.11 million were foreigners, up 17.6 percent; and 105.76 million were Chinese compatriots from Hong Kong, Macao and Taiwan, up 2.9 percent. Of all the inbound tourists, overnight visitors counted 54.72 million, up 9.6 percent. Foreign exchange earnings from international tourism topped 41.9 billion US dollars, up 23.5 percent. The number of China’s outbound visitors totaled 40.95 million, up 18.6 percent. Of this total, 34.92 million were on private visits, a year-on-year rise of 21.3 percent, or 85.3 percent of all outgoing visitors. The year 2007 saw 1.61 billion domestic tourists, up 15.5 percent. The revenue from domestic tourism totaled 777.1 billion yuan, up 24.7 percent.

VIII. Banking, Securities and InsuranceBy the end of 2007, money supply of broad sense (M2) was 40.3 trillion yuan, reflecting a year-on-year increase of 16.7 percent. Money supply of narrow sense (M1) was 15.3 trillion yuan, up 21.1 percent. Cash in circulation (M0) was 3.0 trillion yuan, up 12.2 percent. Savings deposit in Renminbi and foreign currencies in all items of financial institutions totaled 40.1 trillion yuan at the end of 2007, up 15.2 percent. Loans in Renminbi and foreign currencies in all items of financial institutions reached 27.8 trillion yuan, up 16.4 percent.

Loans in Renminbi from rural financial cooperation institutions (i.e. rural credit cooperatives, rural cooperation banks, and rural commercial banks) totaled 3.1 trillion yuan by the end of 2007, an increase of 508.5 billion yuan as compared with the beginning of 2007. The loans in Renminbi for consumption use from all financial institutions totaled 3.3 trillion yuan, an increase of 869.9 billion yuan. Of all consumption loans, those for individual housing totaled 2.7 trillion yuan, an increase of 714.7 billion yuan.

Funds raised in 2007 by enterprises through issuing stocks and share rights on stock market amounted to 843.2 billion yuan, an increase of 283.8 billion yuan over the previous year. Of this total, 283 companies issued A-shares (including newly issued and convertible loan stocks) with 7 companies issued A-share rights, receiving 772.8 billion yuan worth of capital altogether, an increase of 526.4 billion yuan over 2006. The issue of 14 H-shares raised another 70.4 billion yuan worth of capital, a decrease of 242.7 billion yuan. The number of listed companies (with A- or B-shares) on China’s stock market rose from 1,434 at the end of 2006 to 1,550 at the end of 2007, representing 32,714.1 billion yuan worth of market value, a growth of 265.9 percent over the previous year.

The total corporate bonds issued throughout the year reached 1,708.4 billion yuan, an increase of 352.0 billion yuan over 2006. Of this total, the financial bonds were 1,191.3 billion yuan, a growth of 230.8 billion yuan; the enterprise (corporate) bonds were 182.1 billion yuan, an increase of 80.6 billion yuan; and the short-term financing funds were 334.9 billion yuan, an increase of 40.6 billion yuan.

In 2007, the post-graduate education enrollment was 1.2 million students with 420 thousand new students and 310 thousand graduates. The general tertiary education enrollment was 18.85 million students with 5.66 million new students and 4.48 million graduates. Vocational secondary schools of various types had 20 million enrolled students, including 8 million new entrants, and 5.3 million graduates. Senior secondary schools had 25.22 million enrolled students, including 8.4 million new entrants, and 7.88 million graduates. Students enrolled in junior secondary schools totaled 57.36 million, including 18.69 million new entrants, and 19.64 million graduates. The country had a primary education enrollment of 105.64 million students, including 17.36 million new entrants, and 18.7 million graduates. There were 410 thousand students enrolled in special education schools, with 60 thousand new entrants. Kindergartens accommodated 23.49 million children.

Figure 12: New Entrants into Education, 2003 - 2007

The amount of expenditures on research and development activities (R&D) was worth 366.4 billion yuan in 2007, up 22.0 percent over 2006, accounting for 1.49 percent of GDP. Of this total, 18 billion yuan was appropriated for fundamental research programs. A total number of 1,540 projects under the National Key Technology Research and Development Program and 2,541 projects under the Hi-tech Research and Development Program (the 863 Program) were implemented. The year 2007 saw the establishment of 9 new national engineering research centers and 6 national engineering laboratories. the number of state validated enterprise technical centers reached 499 by the end of the year. The technical centers at the provincial level numbered 4,023. Some 694 thousand patent applications were accepted from home and abroad, of which 587 thousand were domestic applications, accounting for 84.5 percent of the total. A total number of 245 thousand patent applications for new inventions were accepted, of which 153 thousand were from domestic applicants or 62.4 percent of the total. A total of 352 thousand patents were authorized in 2007, of which 302 thousand were domestic patents, accounting for 85.7 percent of the total. A total of 68 thousand patents for new inventions were authorized, of which 32 thousand were domestic ones, accounting for 47.0 percent. A total of 210 thousand technology transfer contracts were signed, representing 220 billion yuan in value, up 21.0 percent over the previous year. The year 2007 saw 10 times of successful launch of satellites and Chang’e-1 circumlunar exploration satellite was launched successfully.

By the end of 2007, there were altogether 24,700 laboratories for product inspection, including 356 national inspection centers. There were 184 organizations for product certification and management system certification, which accumulatively certified products in 70 thousand enterprises. A total of 3,720 authorized measurement institutions enforced compulsory inspection on 42.18 million measurement instruments in the year. A total of 1,411 national standards were developed or revised in the year, including 747 new standards. Through out the year, a total of 3,350 weather forewarning signals were released and alarm signals were 690 times. There were 1,314 seismological monitor stations and 31 seismological remote monitor network stations. The numbers of oceanic observation stations were 66 and oceanic monitor spots reached 9,200. Mapping departments published 1,946 maps and 417 mapping books.

X. Culture, Public Health and Sports

At the end of 2007, there were 2,856 art-performing groups, 2,921 culture centers, 2,791 public libraries, 1,634 museums, 263 radio broadcasting stations, 287 television stations, 1,993 radio broadcasting and television stations and 44 educational television stations throughout China. Subscribers to cable television programs numbered 151.18 million. Subscribers to digital cable television programs were 26.16 million. Radio broadcasting and television broadcasting coverage rates were 95.4 percent and 96.6 percent respectively. The country produced 402 feature movies and 58 science, educational, documentary, cartoon and special movies. A total of 43.9 billion copies of newspapers and 2.9 billion copies of magazines were issued, and 6.6 billion copies of books published. by the end of the year, there were 3,952 archives in China and 67.87 million documents were made accessible to the public.

By the end of 2007, there were 315 thousand health institutions in China, including 60 thousand general hospitals and health centers, 3,007 maternal and child health-care institutions, 1,400 specialized health institutions, 3,540 epidemic disease prevention centers (stations) and 2,590 health monitoring institutions. There were 4.68 million health workers in China, including 2.04 million practicing doctors and assistant practicing doctors and 1.47 million registered nurses. General hospitals and health centers in China possessed 3.279 million beds. There were 24 thousand community health service centers. the number of rural health care centers was 39 thousand, possessing 675 thousand beds and employing 863 thousand health care workers. In 2007, 3.581 million people were infected by A or B class infectious diseases, with 12,954 reported deaths. the incidence of infectious disease was 272.4 per 100 thousand, with the death rate standing at 0.99 per 100 thousand.

In 2007, Chinese athletes won 123 world championships on 22 sports events. Eight athletes and 2 teams broke 10 world records on 10 occasions. the amateur sports activities were carried out vigorously.

XI. Population, Living Conditions and Social Security

At the end of 2007, the total number of Chinese population reached 1,321.29 million, an increase of 6.81 million over that at the end of 2006. The year 2007 saw 15.94 million births, a crude birth rate of 12.10 per thousand, and 9.13 million deaths, or a crude death rate of 6.93 per thousand. The natural growth rate was 5.17 per thousand. the sex ratio at birth was 120.22.

In 2007, the annual per capita net income of rural households was 4,140 yuan, or a real increase of 9.5 percent over the previous year when the factors of price increase were deducted. The annual per capita disposable income of urban households was 13,786 yuan, or a real increase of 12.2 percent. The Engel coefficient (which refers to the proportion of expenditure on food to the total expenditure of households) was 43.1 percent for rural households and 36.3 percent for urban households. The population in absolute poverty in rural areas with annual per capita net income below 785 yuan numbered 14.79 million at the end of 2007, a decline of 6.69 million over the previous year. The low-income population in rural areas with annual per capita net income between 786 - 1067 yuan numbered 28.41 million, a decline of 7.09 million.

Figure 13: Per Capita Net Income of Rural Households and its Growth, 2003-2007

Figure 14: Per Capita Disposable Income of Urban Households and its Growth, 2003-2007

At the end of 2007, a total of 201.07 million people participated in basic pension program, a year-on-year increase of 13.41 million. Of this total, 151.56 million were staff and workers, and 49.51 million were retirees. A total of 220.51 million people participated in urban basic health insurance program, an increase of 63.19 million, of whom 179.83 million people participated in urban basic health insurance program for staff and workers, 40.68 million people participated in programs for residents. A total of 31.31 million people participated in urban health insurance programs were migrant workers coming from the rural areas, an increase of 7.64 million. Some 116.45 million people participated in unemployment insurance programs, an increase of 4.58 million. A total of 121.55 million people participated in work accident insurance, an increase of 18.87 million, of which 39.66 million were migrant workers coming from the rural areas, an increase of 14.29 million. A total of 77.55 million people participated in maternity insurance programs, an increase of 12.96 million. A total of 2,448 counties (cities, districts) conducted the new cooperative medical care system in rural areas, attracting 730 million farmers which represented a participation rate of 85.7 percent. The total expenditure of the new cooperative medical care system in rural areas reached 22 billion yuan, benefiting 260 million people. In 2007, the urban medical assistance helped 4.07 million people, up by 117.2 percent. The rural medical assistance helped 6.03 million people, up by 150.1 percent. A total of 23.06 million people were funded by the civil affairs department in the rural cooperative medical care system.

The number of people receiving unemployment insurance payment stood at 2.86 million. A total of 22.71 million urban residents received the government minimum living allowances, or 310 thousand more than the previous year. About 34.52 million rural residents received the government minimum living allowance, an increase of 18.59 million.

Social welfare institutions of various types provided 2.05 million beds by the end of 2007, accommodating 1.63 million inmates. There were 128 thousand community service facilities and 10,299 comprehensive community service centers were set up in urban areas. A total of 63.2 billion yuan worth of social welfare lottery tickets were sold, raising 21.7 billion yuan of social welfare funds. A total of 4.2 billion yuan were received from direct donations.

XII. Resources, Environment and Work Safety

A total of 188.3 thousand hectares of cultivated land was used for construction purpose in 2007. An area of 17.9 thousand hectares of cultivated land was destroyed by disasters, 25.4 thousand hectares of farmland was converted into land for ecological preservation. The structural adjustment to agriculture led to a reduction of 4.9 thousand hectares of cultivated land. Land reclamation and re-development programs added 195.8 thousand hectares of cultivated land. As a result, the year 2007 witnessed a net reduction of 40.7 thousand hectares of cultivated land.

The total stock of water resources in 2007 was 2,469.0 billion cubic meters, a year-on-year decline of 2.5 percent, or 1,873 cubic meters in per capita terms, down by 3.0 percent. The annual average precipitation was 608 millimeters, up by 1.9 percent. Large reservoirs in China stored 186.9 billion cubic meters of water at the end of 2007, 5.2 billion cubic meters more than that at the end of 2006. Total water consumption went down by 0.6 percent to reach 576.0 billion cubic meters, of which water consumption for living purposes rose by 1.6 percent, for industrial use up by 2.7 percent and for agricultural use down by 2.2 percent. Water consumption for every 10 thousand yuan worth of GDP produced was 253 cubic meters, a decline of 10.8 percent. Water consumption for every 10 thousand yuan worth of industrial value added was 139 cubic meters, down by 9.5 percent. Per capita water consumption was 437 cubic meters, down by 1.1 percent.

National land surveys and geological explorations discovered a total of 208 new mineral deposits in large or medium size, including 50 energy mineral deposits, 73 metallic mineral deposits, 82 non-metallic mineral deposits and 3 aqueous and gaseous deposits. Increased reserves were found for 77 minerals, including 1.21 billion tons of crude oil, 697.4 billion cubic meters of natural gas and 40.62 billion tons of coal.

A total of 5.20 million hectares of forest were planted, 3.71million hectares of forest were survived, of which 2.56 million were afforested by manpower. Some 2.68 million hectares were afforested through key afforestation projects, accounting for 72.2 percent of the total planted area of the year. About 2.27 billion trees were planted in 2007 by volunteers. By the end of 2007, there were 2,531 natural reserves including 303 national ones and covering a total area of 151.88 million hectares, or 15.0 percent of the total land area of China. A total of 39 thousand square kilometers of eroded land were put under comprehensive treatment programs, and 33 thousand square kilometers of land were closed for nurture and protection in areas suffering water and soil erosion.

Preliminary estimation indicated that the total energy consumption in 2007 amounted to 2.65 billion tons of standard coal equivalent, up 7.8 percent over 2006. The consumption of coal was 2.58 billion tons, up 7.9 percent; crude oil 340 million tons, up 6.3 percent; natural gas 67.3 billion cubic meters, up 19.9 percent; and electric power 3,263.2 billion kilowatt hours, up 14.1 percent. The consumption of major kinds of raw materials included 520 million tons of rolled steel, up 17.4 percent; 3.99 million tons of copper, up by 13.0 percent; 11.12 million tons of electrolytic aluminum, up by 27.6 percent; 10.48 million tons of ethylene, up by 11.4 percent; and 1.33 billion tons of cement, up 10.5 percent.

Figure 15: Total Energy Consumption and its Growth, 2003-2007

Monitoring of water quality on 408 sections of the 7 major water systems in China showed that 50.0 percent of the sections met the national quality standard of Grade III for surface water, 26.5 percent of the sections met the quality standard of Grade IV or V, and 23.5 percent were worse than Grade V. There was no significant change of the water quality in the 7 major water systems as compared with that in the previous year.

Monitoring of oceanic water quality at 296 offshore monitoring stations indicated that oceanic water met the national quality standard Grade I and II in 62.8 percent of the stations, down by 4.9 percentage points from the previous year; water quality at 11.8 percent of the stations met Grade III standard, up by 3.8 percentage points; and water of Grade IV or inferior quality was found at 25.4 percent of the stations, up by 1.1 percentage points. A total of 145 thousand square kilometers of oceanic waters did not meet the quality standard for clean oceanic water, a decrease of 4 thousand square kilometers. of this total, seriously polluted oceanic area occupied 29 thousand square kilometers. Seriously polluted oceanic area in Bohai Sea occupied 6 thousand square kilometers.

In the 557 cities covered by air quality monitoring program, 389 cities reached or topped air quality standard Grade II, accounting for 69.8 percent of all cities under the program; 152 cities attained Grade III, accounting for 27.3 percent; and air quality in 16 cities was inferior to Grade III, accounting for 2.9 percent. of the 342 cities subject to noise monitoring program, 6.1 percent enjoyed fairly good environment, 64.6 percent had good environment, 28.1 percent had light noise pollution, and 1.2 percent experienced medium noise pollution in downtown areas.

The average temperature in 2007 was 10.1℃, which was 0.2℃ higher than that in previous year. Typhoon hit China 8 times in 2007, 2 more compared with that in 2006.

At the end of 2007, the daily treatment capacity of city sewage reached 70.00 million cubic meters, up 10.0 percent over that in 2006. City sewage treatment rate was 59.0 percent, up 3.3 percentage points. The floor space with central heating systems amounted to 2.85 billion square meters, up 7.1 percent. Greenery coverage reached 36.0 percent of the urban area, up 1 percentage point.

In 2007, natural disasters caused 236.3 billion yuan worth of direct economic loss, down by 6.5 percent. Natural disasters hit 48.99 million hectares of crops, up 19.2 percent, of which 5.75 million hectares of crops was demolished, up 6.2 percent. 2007 witnessed 9,260 forest fires, up by 13.3 percent. There was no extra big forest fire. Floods and waterlog caused a direct economic loss of 82.6 billion yuan, up by 46.9 percent and left a death roll of 1,168, up by 54.9 percent. Drought caused a direct economic loss of 78.5 billion yuan, up by 10.9 percent. Oceanic disasters caused a direct economic loss of 8.84 billion yuan, down by 59.5 percent. The occurrence of red tides hit an accumulative area of 11,610 square kilometers, down by 41.5 percent. China registered 25 thousand geological disasters which left a death doll of 598 and made a total direct economic loss of 2.48 billion yuan. The country recorded 6 earthquakes with magnitude 5 and over, 3 of which caused disasters, causing a direct economic loss of 2.02 billion yuan.

The death toll due to work accidents amounted to 101,480 people, a year-on-year decrease of 10.1 percent. The death toll from work accidents every 100 million yuan worth of GDP was 0.413 people, a decline of 26.3 percent. Work accidents in industrial, mining and commercial enterprises caused 3.05 deaths out of every 100 thousand employees, down 8.4 percent. The death toll for producing one million tons of coal in coal mines was 1.485 persons, down 27.2 percent. The year 2007 witnessed 327 thousand traffic accidents, claiming 82 thousand lives, injuring 380 thousand people and causing a direct property loss of 1.2 billion yuan. The road traffic death toll per 10 thousand vehicles was 5.1 persons, a decrease of 1.1 persons.Notes:

1. All figures in this Communiqué are preliminary statistics.2. Statistics in this Communiqué do not include Hong Kong SAR, Macao SAR and Taiwan Province.3. Due to the rounding-off reasons, the subentries may not add up to the aggregate totals.4. Gross domestic product (GDP) and value added as quoted in this Communiqué are calculated at current prices, whereas their growth rates are at comparable prices.5. The base figures for calculating the output growth rate of major farm products are adjusted correspondently according to the results of the second national agricultural census. The output of fruits and vegetables are under checking, and will be published separately.6. Six highly energy-consuming industries are: manufacture of raw chemical materials and chemical products, manufacture of non-metallic mineral products, smelting and pressing of ferrous metals, smelting and pressing of non-ferrous metals, oil processing, coking and nuclear fuel processing, and production and supply of electricity and heat.7. Output and consumption of rolled steel include duplicated counting of rolled steel as intermediate inputs used for producing other types of rolled steel. 8. The national total of fixed assets investment is larger than the aggregate sum by adding up the subtotals of fixed assets investment in the eastern areas, central areas, and western areas due to the fact that some of the trans-regional investments are not covered by regional figures.9. The investment in real estate includes the investment made in real estate development, construction of buildings for own use, property management, intermediary services and other real estate development. 10. The original premium income received by the insurance companies refers to the premium income from original insurance contracts confirmed by the insurance companies, same as the “premium received by the insurance companies” in previous Communiqués.11. The number of people covered in urban basic health insurance programs for urban staff and workers include staff and workers and retirees insured. the urban basic health insurance programs for urban residents refer to urban non-employed residents who are not covered by the urban basic health insurance programs for staff and workers.12. The consumption of water for producing 10 thousand yuan worth of GDP is calculated at 2005 constant prices. The turnover of post and telecommunication services is calculated at constant prices of 2000.13. The consumption of energy for producing 10 thousand yuan worth of GDP, the total emission of chemical oxygen demand (COD) and the sulfur dioxide (SO2) of the whole country will be further certified by relevant departments and be published in near future.

Lenovo Thinkpad X300 vs Apple Mackbook Air

You can click it to view a the bigger picture of this table.

The only thing I need to mention here is that the CPUs used by both machines are all Core 2 Duo SL7100 LV. Thinkpad X300's runs on lower clock at 1.2GHZ. The 800MHZ in the table is actually the front bus speed.

Beijing opens massive airport terminal

Beijing's new international air terminal, which opened today in time for the Summer Olympics surge, attracts and embodies superlatives. It also embodies the new China, a country racing headlong into the future fueled by an economy on fire.

For many countries increasingly worried about how competitive and fast-moving China is, this $2.8-billion project provides one more reason to fret. China's authoritarian system can certainly move. At its peak, the construction site had 50,000 workers toiling around the clock.

"Most Western politicians wouldn't admit agreeing to that system, but they're very jealous," said Rory McGowan, Beijing-based director of global engineering firm Ove Arup & Partners, which worked on the project. The Chinese "can react to decisions four or five times faster than we can [in the West] because China runs the way it does." China has a long history of awing visitors with structures that evoke size and power, epitomized by the Forbidden City.

The terminal measures about 10.6 million square feet. By comparison, the Pentagon, often described as the largest office building in the world, is 6.5 million square feet. And the enormous terminal is astride a runway able to handle the new Airbus A380 superjumbo jets. It's got all manner of bells and whistles, including "barrier-free" facilities for the disabled, floor tracking to guide the blind, and multi-denominational prayer rooms in an officially atheist country. It also has baby-changing facilities galore and 26 smoking rooms with advanced filtering systems -- in short, a lot of stuff you probably won't see again during your stay in China.

The designers put a premium on air, light, greenery and distinct Chinese characteristics. The sloping roof is meant to evoke a dragon, with triangular skylights resembling scales. Feng shui principles were incorporated into the design, and the interior is decorated in colors that hold special meaning for Chinese.

"Feng shui has a scientific and a superstitious side," said Shao Weiping, principal architect with Beijing Architectural Design. "We used the scientific side."

Six airlines will start flying from Beijing's massive terminal today, and flag carrier Air China and others will move from the airport's two older terminals in March. Air China and United are the only airlines offering nonstop service from Beijing to LAX. United's flights will also move to the new terminal next month.

The new terminal will boost the airport's annual capacity by tens of millions of passengers to 82 million, a target planners originally expected to hit around 2015, but now believe could come years earlier. A second international airport is already under consideration.

Thursday, February 28, 2008

Analysis: Demise of India's IC manufacturing dreams

When India government and media are still loudly shouting about semiconductor industry, such as India gets $7 bn for Fab City, Industrial analysis found everything is just illusion. Here is a report from EETimes.

One word: India's voice is always louder than its action.

India's chip manufacturing dreams appear to be doomed as SemIndia's $3 billion-fab project is likely to die a premature death as will another fab planned by India Electronics Manufacturing Corp. (IEMC). In addition, Korean investor June Min's plan to set up India's first fab in Hyderabad has been abandoned in favor of making photovoltaic products.

India had made major strides in the last year, announcing a chip manufacturing policy. The incentive policy was intended to help launch state-of-the-art fabs in the country over the next few years.

But the high expectations here for a domestic chip industry have faded as financial realities reemerge. Both SemIndia's fab, which would use technology from Advanced Micro Devices, and IEMC's fab with partner Infineon Technologies, appear to be dead in the water.

Venture capital firm Sandalwood Partners, Wall Street fund Empire Capital Partners and contract electronics manufacturer Flextronics, which together have pumped more than $30 million into the SemIndia venture, are uncertain about SemIndia's fab strategy, according to sources close to the project.

"There are many uncertainties in the Indian context," said one industry source. "In particular, since the semiconductor industry is a very dynamic and cyclic—with periodic downturns and a highly intensive capital industry—it becomes imperative that any company involved in this area has to be able to manage its investments, capacity allocation, new factories and phasing out of the old technologies in a shorter timeframe.

"This is crucial to the survival and growth of the semi industry. It is not clear that it is yet possible to manage this dynamics in India," the industry source added.

Shifting gearsDespite the uncertainty, SemIndia's Systems unit is emerging as the company's flagship, and its manufacturing capability has bolstered the company's financial performance. Similarly, IEMC outlined revised plans focusing on the photovoltaic market where CEO Rajendra Singh is an expert.

The $25-billion conglomerate Reliance or other deep- pocketed suitors may also be considering a buyout of ailing chip makers like AMD, say industry observers.

Its investors have a simple strategy for SemIndia: From the start, grow SemIndia Systems into a profitable venture. It is the first Indian manufacturer to ship over 1 million ADSL2+ broadband modems in its first year of production. Annual revenues surpassed $25 million in 2007, and its run rate for 2008 is an estimated $80 million.

The Indian manufacturer has overtaken established companies such as D-Link, Huawei, ZTE and other Chinese companies that have long supplied Indian companies.

SemIndia Systems has also recorded substantial growth in less than two years, and investors are forecasting as much as 50-fold growth within the next three to four years if it sticks with back-end manufacturing rather than chip making.

"It is precisely because of this that SemIndia is attracting the attention of many funding institutions, and is likely to announce a substantial additional funding from a handful of U.S. VCs and Wall Street funds," a source said.

New plansIndia's electronics market is expected to reach $363 billion by 2015, and domestic demand for semiconductors alone is forecast to reach $36 billion, according to market researcher Frost & Sullivan.

"Sometimes when you are too close to the project you are not able to see where you are going," said one investor. "That was precisely the case with the SemIndia project. Now, we have realized that we were wrong, and to straighten things out we are requesting for the company to change the business model."

IEMC executives have also shelved its fab plans. "We are not planning to set up a fab in India for the time being. We have other plans," said an IEMC executive who asked not to be named.

A key reason is soaring fab costs. The $3-billion investment which SemIndia envisaged in October 2005 now stands at $7 billion. And the question now is, why spend $7 billion when a company could buy an existing chipmaker for the same amount?

According to industry analyst Y. Shashidar, "India has to take smaller steps and move in a right direction. If Indian companies can buyout fabs, they should check out the technology and see whether their business plans could integrate" a fab.

Industry analysts also blame the Indian government's delayed and murky chip policy for the failure to launch a fab here. Policy makers were offering a special incentive package scheme to encourage fab investments, including a 25-percent subsidy on capital expenditures for manufacturing outside special economic zones and 20 percent inside these zones. "However, the form in which the government will provide this subsidy is unclear," financial advisor Deloitte concluded in an internal note on semiconductor investments in India.

Industry experts also wonder what an India chipmaker could offer the global market that Chinese manufacturers can't. With Intel Corp. planning a 65nm fab in China, most observers here agree with an IEMC executive who said India's "big fab story is truly dead."

The revenues for semiconductors in India during 2006 have fallen short of the forecast of India Semiconductor Association (ISA) ô Frost & Sullivan study by 41 per cent.

The ISA-Frost & Sullivan semiconductor market report had forecast the revenues in the Indian total market to touch $3.8 billion and the total available market (TAM) revenues to touch $1.62 billion. However, the report update in 2007 estimated the actual revenues at $2.69 billion (total market revenues) and $1.26 billion (TAM).

The report update, released at the ISA Vision Summit 2008 on Monday, attributes the shortfall in revenues to the sharp decline in various semiconductors Average Selling Price (ASPs) in different end-user product categories.

Textile sector fails to gain from quota removal

I bet many reader still remember India's tout about India would pass China in textile industry. But the fact hits back again. This following is the news from The Times of India. . More information can be found on that website.

The dismantling of the quota system failed to work wonders for textile and clothing (T&C) exports from India while neighbouring China marched ahead, despite restricitve quotas imposed by major importers like the US and EU.

Quota system was dismantled in 2005 and India was counted among key beneficiaries. However, the survey clearly shows that China beat India in major markets like the US and EU, leaving much to be desired.

"Though the growth in our T&C exports to the world accelerated sharply to 30% in 2005, it reverted back to the trend levels in 2006 with a disappointing 10.5%. China, in contrast, continued to raise its already high share of global T&C exports, with growth accelerating from 21% in 2005 to 25% in 2006, despite restrictive quotas by the US and EU," the survey said.

India's share in the global T&C exports grew by just 0.7% to 3.7% between 2004 and 2006 just when China managed to increase its share by a big 6.3% to 27.2%.

The worrying trend continued for India in 2007 as well, if one looks at the US market. In January-November 2007, US imports of T&C from the world grew by only 3.8%, affecting imports from India that grew by only 2% though China again managed a robust 20.5% growth.

Monday, February 25, 2008

What Makes a Miracle? Some myths about the rise of China and India

By Pranab Bardhan

After more than a century of relative stagnation, the economies of India and China have been growing at remarkably high rates over the past 25 years. In 1820 the two countries contributed nearly half of the world’s income; by 1950, with the industrialized West having pulled away, their share had fallen to less than one-tenth. Today it is just less than one-fifth, and projections suggest that by 2025 it will rise to one-third. (In 2008 the World Bank is expected to issue revised numbers about cost of living in China and India, which may somewhat reduce these estimated income shares, both current and future).

The consequences of this expansion are extraordinary. The Chinese economy in particular has made the most headway against poverty in world history, with hundreds of millions of people moved out of the most extreme poverty within just a generation. (The environmental consequences are comparably remarkable, though perhaps proportionately disastrous).

What explains this strikingly rapid growth? The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty.

While India’s performance has been substantial, China’s has been truly dramatic. The particularly dramatic Chinese performance (like the earlier economic “miracles” in South Korea, Taiwan, and Singapore) suggests, in the dominant narrative, that authoritarianism may be better than democracy for development—at least in its early stages. Regional economic decentralization provided local autonomy and incentives, and, even without democracy, led to broad-based local development. But the narrative warns that global capitalism has brought rising inequality, more in China than in India. The idea is that this may portend serious trouble for Chinese political stability, as China does not have the capability of democratic India to let off the steam of inequality-induced discontent.

This story contains a few elements of truth and provides many comforts to our preconceptions. But through sheer repetition it has acquired an authority that does not withstand scrutiny.

Start with the claim that global integration and associated market reforms resulted in high growth, which in turn produced dramatic declines in extreme poverty. Applied to China, the timing simply does not fit. China has indeed made large strides in foreign trade and investment since the 1990s, but well before then, say between 1978 and 1993, the country had already achieved an average annual growth rate of about nine percent—even higher than the impressive seven percent growth rate in East Asia between 1960 and 1980.

China’s poverty-reduction storyline is similarly flawed. While expansion of exports of labor-intensive manufactures lifted many people out of poverty over the past decade, the principal reason for the dramatic decline over the past three decades may lie elsewhere. World Bank estimates suggest that two-thirds of the decline in extremely poor people (those living below the admittedly crude poverty line of one dollar a day per capita at 1993 international parity prices) between 1981 and 2004 had taken place by the mid-1980s. Much of the extreme poverty was concentrated in rural areas, and its large decline in the first half of the 1980s may have been principally the result of domestic factors that have little if anything to do with global integration: a spurt in agricultural growth following de-collectivization, in which output increased at 7.1% per year on average between 1979 and 1984, almost triple the 1970-78 rate; a land reform program, involving a highly egalitarian distribution of land-cultivation rights subject only to differences in regional average and family size, which provided a floor for rural income; and increased farm procurement prices.

As for India, market reforms may not be mainly responsible for its recent high growth. Reform has clearly made the Indian corporate sector more vibrant and competitive, but most of the Indian economy lies outside the corporate sector; for example, 93 percent of the labor force works outside the corporate sector, private or public.

Take the fast-growing service sector, where India’s IT-enabled services have acquired a global reputation while employing less than a quarter of one percent of the total Indian labor force. Service subsectors like finance, business services (including those IT-enabled services), and telecommunication, where reform may have made a significant difference, constitute only about a quarter of total service-sector output. Two-thirds of service output is in traditional or “unorganized” activities, in tiny enterprises often below the policy radar and unlikely to have been directly much affected by regulatory or foreign trade policy reforms. It is a matter of some dispute how much of the growth in traditional services (mostly non-traded) can be explained by a rise in service demand in the rest of the economy, and how much of it is a statistical artifact, since the way output is measured in these traditional services has been rather shaky all along.

As for poverty, the latest Indian household survey data suggest that the rate of decline, if anything, slowed somewhat in 1993-2005—the period of global integration—compared with the ’70s and ’80s. Moreover, some non-income indicators of poverty such as those relating to child health, already rather dismal, have hardly improved in recent years. (For example, the percentage of underweight children in India is much larger than in sub-Saharan Africa and has not changed much in the past decade or so). Growth in agriculture, where much of the poverty is concentrated, has declined somewhat over the past decade, largely because of the decline of public investment in rural infrastructure such as irrigation. Little of this has much to do with globalization. Indeed, some disaggregated studies across districts in India have found trade liberalization slowing down the decline in rural poverty. Such results may indicate the difficulty displaced farmers and workers have had adjusting to new activities and sectors due to various constraints such as minimal access to credit, information, or infrastructural facilities like power and roads; the high-school-dropout rate; and labor market rigidities—even as new opportunities are opened up by globalization.

The pace of poverty reduction in India has been slower than that in China not simply because Chinese growth has been faster, but also because the same one percent growth rate reduces poverty in India by much less, thanks largely to higher wealth inequalities (particularly in land and education). The Gini coefficient (a standard statistical measure of inequality, with a value of one indicating extreme inequality and zero indicating perfect equality) of land distribution in rural India was 0.74 in 2003; the corresponding figure in China was 0.49 in 2002. To a large extent this difference reflects a higher proportion of landless and near-landless people in India. In addition, educational inequality in India is among the worst in the world. According to the World Development Report 2006, the Gini coefficient of the distribution of adult schooling years in the population was 0.56 in India in 1998/2000, which is not only higher than China’s 0.37 in 2000, but even higher than almost all Latin American countries. To a large extent, this indicator reflects the high number of illiterate and near-illiterate people relative to the rest of the population in India.

The storyline about China and India’s “socialist slumber” is equally suspect. China and India have become poster children for market reform and globalization in much of the financial press, even though both countries’ economic policies with regard to privatization, property rights, and deregulation have departed demonstrably from free-market orthodoxy in many ways.

And what about the earlier period? Was it really an utter waste? While socialist control and regulations undoubtedly inhibited initiative and enterprise in both countries, the positive legacy of reforms undertaken in the ‘70s and ‘80s cannot be denied, particularly in China’s recent pattern of state-controlled capitalist growth.

China’s earlier socialist period arguably provided a good launching pad for market reform. That foundation provided wide access to education and health care; highly egalitarian land redistribution that created a rural safety net and thus eased the process of market reform, with all its wrenching disruptions and dislocations; increased female labor participation and education that enhanced women’s contribution to economic growth; and a system of regional economic decentralization (that linked the career paths of Communist Party officials to local area performance). County governments were in charge of production enterprises long before Deng Xiaoping’s economic reforms set in, and, even more significantly, the earlier commune system’s production brigades evolved into the highly successful township and village enterprises that led the later phenomenal rise of rural industrialization.

In all these respects China’s legacy from the earlier period has been much more distinctive than that in India. When I grew up in India, I used to hear leftists say that the Chinese were better socialists than us. Now I am used to hearing that the Chinese are better capitalists than us. I tell people, only half-flippantly, that the Chinese are better capitalists now because they were better socialists then!

The earlier period’s legacy in both countries is also evident in the cumulative effect of the state’s active role in technological development. It is often overlooked that the Chinese have succeeded in international markets with more than simple labor-intensive products such as clothing, toys, shoes, and wigs. Both China and India (but China more so) have succeeded in exporting more sophisticated products than is usual in countries in their respective per capita income ranges: China, in consumer electronics, including computers and other information- and communication-technology-related goods, and auto parts; India, in software, pharmaceuticals, vehicles, steel, and auto parts. This performance is remarkable (though more in gross value of exports than in value-added terms, as some of the components and technology used in production are acquired from abroad) and is due primarily to sizeable skill and technological bases, enriched over the years of “socialist slumbering” by indigenous learning-by-doing and nurtured by government policies of building domestic capability—sometimes at the expense of static resource allocation efficiency.

Of course, there are many cases in which protection from foreign competition sheltered massive inefficiency. But the overall storyline is by no means so simple. Consider auto parts. For many decades both countries practiced protection of “local content” (of components) in automobiles, contrary to the orthodox free-trade policy prescription. As a result workers in the auto parts industry acquired skills necessary to compete successfully in the global economy and have now reached international best practice.

What about democracy’s role in economic growth? The much more dramatic success of China (and, earlier, that of other East Asian countries under authoritarian regimes) compared with India does not in any way prove the superiority of authoritarianism over democracy in matters of development. Authoritarianism is neither necessary nor sufficient for development. That it is not necessary is illustrated not only by today’s developed countries, but by scattered cases of recent development success: Costa Rica, Botswana, and now India. That it is not sufficient is amply evident from disastrous authoritarian regimes in Africa and elsewhere.

The relationship between democracy and development is much more complex than the conventional wisdom suggests. Even if we were not to value democracy for its own sake (or regard it as an integral part of development by definition), and looked at it in a purely instrumental way, democracy has at least four advantages from the point of view of development. Democracies are better able to avoid catastrophic mistakes, (such as China’s Great Leap Forward and the ensuing great famine that killed nearly thirty million people, or its Cultural Revolution, which may have resulted in the largest destruction of human capital in history) and have greater healing powers after difficult times. Democracies also experience more intense pressure to share the benefits of development, thus making it sustainable, and provide more scope for popular movements against industrial fallout such as environmental degradation. In addition, they are better able to mitigate social inequalities (especially acute in India) that act as barriers to social and economic mobility and to the full development of individual potential. Finally, democratic open societies provide a better environment for nurturing the development of information and related technologies, a matter of some importance in the current knowledge-driven global economy. Intensive cyber-censorship in China may seriously limit future innovations in this area.

All that said, India’s experience suggests that democracy can also hinder development in a number of ways. Competitive populism—short-run pandering and handouts to win elections—may hurt long-run investment, particularly in infrastructure, which is the key bottleneck for Indian development. Such political arrangements make it difficult, for example, to charge user fees for roads, electricity, and irrigation, discouraging investment in these areas, unlike in China where infrastructure companies charge full commercial rates. Competitive populism also makes it harder to cut losses resulting from experimentation in industrial policy in India, where retreating from a failed project—with inevitable job losses and bail-out pressures—has electoral consequences that discourage leaders from carrying out policy experimentation in the first place. Finally, democracy’s slow decision-making processes can be costly in a world of fast-changing markets and technology.

China is widely, and rightly, acclaimed for its decentralized development: in the 1980s and ’90s local industries flourished under the control of local governments and collectives. This aspect of industrialization has largely bypassed India so far, even though important constitutional changes favoring devolution of power to local governments were carried out in the ’90s. Of course, decentralization is not always a good thing for development. Some have complained that decentralization in post-Soviet Russia was growth-retarding, as provincial governments were captured by oligarchs, thus legitimizing the subsequent centralization of power by Vladimir Putin. Although egalitarian land reform in China may have helped avert the capture of local institutions by local elites—at least in the initial years of market growth—the problem has plagued regional decentralization in India and Russia.

But even China has had trouble with decentralization in recent years. With local party officials prospering in a reward system that emphasizes local economic performance (with access to profits of local collective enterprises and the power to privatize them), the central government in China is now finding it difficult to rein them in, particularly in matters of land acquisition (where local officials are often in cahoots with local commercial developers), toxic pollution and violation of consumer- product safety regulations (often in collusion with local businesses). The “harmonious society” mantra chanted by the central leadership has not yet succeeded in curbing the capitalist excesses of local business and officialdom. The centralization of tax reform since 1994 has reduced the incentives of the local bureaucracy to serve social needs, particularly in interior provinces. The lack of democratic-accountability mechanisms is, and will continue to be, felt acutely by local populations who face limits both in the types of economic growth they can pursue and in the delivery of social services.

In short, in the absence of democratic devolution, China’s much-celebrated regional decentralization may now be a source of much discontent and may undermine the economic growth it has done so much to foster.

A final element of conventional wisdom is that globalization has led to rising inequality, and that inequality-induced grievances, particularly in rural China, cloud the country’s political future and hence its economic stability. But the effect of globalization on inequality is difficult to disentangle from that of other ongoing changes (such as skill-biased technical progress due to new information and communication technology), and so the causal link between globalization and inequality is not always clear. Moreover, Chinese provinces with more global exposure and higher growth did not have a greater rise in inequality compared with the other provinces in the interior. Decline in agricultural growth in recent years, in both China and India, may also have something to do with the rise in aggregate inequality, as inequality is significantly lower in agriculture than in other sectors.

As for inequality-induced political instability, a frequently cited fact reported from official police records is that incidents of social unrest have multiplied nearly nine-fold between 1994 and 2005. While the Chinese leadership is right to be concerned about inequality, the conventional wisdom in this matter is somewhat askew, as has been pointed out by Harvard sociologist Martin Whyte and his team. Data from their 2004 national representative survey in China show that the presumed disadvantaged in rural or remote areas are not particularly upset by rising inequality. This may be because of the “tunnel effect,” a familiar concept in the literature on inequality: when you see other people prospering you are hopeful that your chance will soon come (you are more hopeful in a tunnel when blocked traffic in the next lane starts moving). This is particularly so with the relaxation of restrictions on migration from villages and improvement in roads and transportation. Farmers are incensed by forcible land acquisitions or the severe environmental damage of land, air, and water than they are by inequality. Chinese leaders have so far succeeded in deflecting the wrath felt toward corrupt local officials and in localizing and containing rural unrest.

It may seem counterintuitive but the potential for unrest is arguably greater in the currently booming urban areas where, along with the breaking of the real estate bubble, a possible global recession could ripple through the excess-capacity industries and financially-shaky public banks. With a more Internet-connected and vocal middle class, a recent history of massive worker layoffs, and a large underclass of migrants, urban unrest could be more difficult to contain.

When faced with political shocks, the Chinese leadership has a tendency to overreact, suppress information, and act heavy-handedly, unnecessarily exacerbating the problem. Still, China now has a very strong economy, which can act as a cushion, and provide more financial resources for assuaging local grievances.

Chinese and Indian economic performance has been far better in the last quarter-century than in the previous two hundred years—and this is one of the striking events in the recent history of the international economy. Other countries must adjust to this reality, and learn to treat the partial restoration of the earlier global importance of these two countries as an opportunity for trade, investment, and exchange of ideas, not as a threat. (We also need to work in tandem with them on the environment.) But we must remember that the story of their rise is more complicated and nuanced than standard accounts make out. That more complex story includes the positive legacy of China and India’s earlier statist periods, which offers general lessons for the process of development much too often ignored.

Source.This marvelous, balanced research by Pranab Bardhan, a professor of Economics at the University of California, Berkeley, is highly recommended.

According to the World Intellectual Property Organisation (WIPO) Patent Cooperation Treaty (PCT), the number of patents filed from India dropped from 831 in 2006 to 686 in 2007. That represented a decline of 17.45 per cent. India retained the 20th position it had in 2006. On the contrary, applications from China grew 38.1 per cent from 3,951in 2006 to 5,456 in 2007, helping it overtake the Netherlands to the 7th position.

If the long-time trend is considered, application from China rised from 1,295 in 2003 to 5,456 in 2007, a whooping 421% increase. India's application decreased from 764 to 686 during the same period.

China's telecommunication gear giant, Huawei Technologies, is now listed as the No. 4 company in the applicant ranking of all the companies in the world, only after Matsushita Electric Industrial from Japan, Philips Electronics from Netherlands and Siemens from Germany.

Travel to India? Incredibly unsafe India

The rape of a 35-year-old foreigner, holding dual citizenship of France and Switzerland, in Pushkar a week ago (the complaint was filed only on Saturday) is the third such incident involving foreign tourists in the last few weeks, in Rajasthan. And this has seriously rattled the ministry of tourism and the tourism industry in general.

Minister Ambika Soni has called a high-level meeting of state tourism secretaries on January 24 to try and find a solution to this serious law and order problem. Recently, Union Tourism Secretary S. Banerjee wrote to all state governments, reminding them of the ministry’s earlier recommendation to deploy special police at popular tourist sites.

The number of foreign tourists in the country has been going up steadily. So has foreign exchange earnings: it was nearly $6,500 million in 2007, up 25 per cent from the previous year. Those in the industry fear the assaults could change all that.

“The dollar is falling, and it has affected our trade. This is somehow being compensated by greater tourist inflow. But if international tourists get concerned about their safety and begin choosing other Asian destinations like China and Singapore over India, the industry is doomed,” says Tahiruddin Tahir, president, Tour Guides Association at the Taj Mahal in Agra.

On Saturday, an American teacher’s wallet was stolen at the Taj. “Such incidents are being noticed and talked about more. The government needs to make tourists feel secure again,” Tahir says.

Agra has reported a number of cases of rape and sexual assault on tourists since September last year.

Ministry officials say law and order, which includes tourist safety, remains a state subject.

Meanwhile, any action the states have taken on Banerjee’s suggestion seems largely token. In Delhi, the tourism police has just about 80 personnel and 10 PCR vans for tourist assistance. This when government statistics reveal the Capital sees the highest number of tourists in the country (20 lakh in 2006). “Ten vans for a destination like Delhi is just not enough. They need to sensitise the entire police force to make tourists feel comfortable,” says a Delhi tourism department official.

Jane Rankin Reid, an Australian who has traveled extensively in India in the last 10 years, says: “I had to learn to cover my shoulders and not show my knees, which is hard to do in the heat. My bottom got pinched in Delhi a few times but to be honest, my bottom got pinched in Rome and London too.” Reid doesn’t subscribe to the view that it’s the colour of her skin that makes her a target. “I don’t think it is because I’m white. None of the sexual come-ons had racial overtones, just the desperation of men not knowing how to respect women.”

Reid has built this opinion over years of staying in India. For most other tourists, such ugly incidents could shape opinion. Countries like the US, UK, Australia, Canada and France have, in travel advisories, already warned citizens on the law and order situation here.